Mirum convertibles jump; Guess? exchanges notes; high-grade paper dominates trading

By Abigail W. Adams

Portland, Me., April 13 – The convertibles primary market was dormant on Thursday after pricing what is poised to be the sole deal of the week the previous session.

Mirum Pharmaceuticals Inc. priced an upsized $275 million of six-year convertible notes after the market close on Wednesday.

The offering played to heavy demand during bookbuilding and skyrocketed on its aftermarket debut.

While Mirum’s convertible notes offering was the sole deal of the week, convertible issuers continued to pursue privately negotiated exchanges to address looming maturities.

Guess? Inc. issued $275 million of new 3.75% convertible notes due 2028 on Thursday with $161.4 million of the new notes exchanged for $184.9 million of the 2% convertible notes due 2024.

With several outstanding convertible notes near liability status, sources expect to see more exchanges take place.

Meanwhile, the new paper sparked an uptick of activity in the secondary space, which remained better to buy on a strong day for equity markets.

The Dow Jones industrial average closed Thursday up 383 points, or 1.14%, the S&P 500 index closed up 1.33%, the Nasdaq Composite index closed up 1.99% and the Russell 2000 index closed up 1.3%.

There was $570 million in reported convertibles trading volume about one hour before the market close with Mirum’s new notes dominating the tape.

Investment-grade issues also continued to see heavy volume although with little movement in price.

Mirum skyrockets

Mirum priced an upsized $275 million of six-year convertible notes after the market close on Wednesday at par with a coupon of 4% and an initial conversion premium of 35%.

Pricing came in line with talk for a fixed coupon of 4% and richer than talk for a fixed conversion premium of 32.5%.

The greenshoe was also upsized to $41.25 million.

The initial size of the offering was $200 million with a greenshoe of $30 million.

The new paper rocketed in the aftermarket.

Mirum’s 4% convertible notes due 2029 were marked at 102.5 bid, 103.5 offered shortly after the opening bell and continued to climb as the session progressed.

“They were up right out of the gate,” a source said.

The notes climbed to 104.5 about one hour into the session and were seen as high as 106 in the late afternoon.

They expanded 3 points on a dollar-neutral, or hedged, basis, a source said.

Mirum’s stock traded to a low of $23.63 and a high of $25.01 before closing at $24.79, an increase of 5.44%.

Guess? exchange

Guess! issued $275 million of new 3.75% convertible notes due 2028 in an exchange for its 2% convertible notes due 2024.

The 3.75% convertible notes carry an initial conversion premium of 30%.

The deal had “a lot of bells and whistles on it,” a source said, which included a call spread and a stock buyback.

The company expects to use a portion of proceeds to repurchase about $42.5 million of common stock at $19 per share.

Approximately $161.4 million of the 3.75% convertible notes were issued in exchange for $184.9 million of the 2% convertible notes.

Following the exchange, the 2% convertible notes will have $115 million outstanding.

The new 3.75% convertible did not trade in the aftermarket on Thursday, sources said.

IG trades

Investment-grade issues continued to dominate the tape with volume concentrated in Duke Energy Corp.’s 4.125% convertible notes due 2026 (Baa2/BBB) and Southern Co.’s 3.875% convertible notes due 2025 (Baa2/BBB).

However, the notes remained unchanged.

Duke Energy’s 4.125% convertible notes continued to trade around 102.125 throughout the session.

While the notes remained unchanged, they continued to switch hands in heavy volume with the notes attracting crossover fixed income investors.

“It’s not a bad yield with an option,” a source said.

Duke’s stock traded to a low of $97.09 and a high of $99.32 before closing at $99.14, off 0.27%.

Southern Co.’s 3.875% convertible notes remained wrapped around 103.

Southern Co.’s stock traded to a low of $70.90 and a high of $72.49 before closing at $72.46, up 0.47%.

Mentioned in this article:

Duke Energy Corp. NYSE: DUK

Guess? Inc. NYSE: GES

Mirum Pharmaceuticals Inc. Nasdaq: MIRM

Southern Co. NYSE: SO

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.